I installed jopensim and tried to create a new user. When I want to give a name formy avatar, it is impossible. There is a select for the last name with errors (see attachment).
I can create the user. Than I go to my avatars profile and I try to change the name. But this is not possible, when I save the changes, the name with errors is still there.
The possible last names are controlled in the global settings in the "User" tab.
Your screenshot looks to me "a little" as if you have set the control type to "Allow" but the plugin can not split the line breaks from the field below ... weired ... never have seen this before
Is your Joomla installation on a windows or linux server? And what happens if you change the last name control setting to e.g. "None"?
The control type was "none". I put it to allow and gave the possibility for the name "toto". It works. I have a select with "toto". But if I put back the control type to "none", I have the same error (select with error).
In fact, the control type "none, allow, prohibit" has no effect. The only effect is when I put names in the control "Names". If I do that I have to choose a name in a select.
This must be some issue together with Joomla 3.6.5 I guess ... cause after I upgraded jopensim.com to it, it seems to have same behaviour. I made some changes and have attached the modified version here. Please let me know if this solves your issue.